Axis Bank Q3 net up 24 percent, beats f'cast

India's No. 3 private lender Axis Bank beat street estimates on Friday with a nearly 24 percent rise in third quarter net profit, helped by higher income from fees and interest, although provisions rose due to a rise in bad loans.

Net profit in the fiscal third quarter-ended December rose to 11 billion rupees from 8.9 billion rupees a year ago, the bank said in a statement.

Net interest income grew 23.5 percent to 21.4 billion rupees.

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Shares of the bank, which has a market capitalisation of nearly $8 billion, rose to its highest level since December, after the results announcement.

"It was a challenging environment," Somnath Sengupta, chief financial officer told television reporters. "We have been able to contain our risks and maintain our credit portfolio. It was a good quarter for us."

Fee income from corporate credit, retail banking, business banking, treasury grew 26 percent to about 12 billion rupees.

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The bank was estimated to post net profit of 10.13 billion rupees, according to Thomson Reuters I/B/E/S.

Net interest margin, a key gauge of profitability, fell 5 basis points to 3.75 percent. The bank estimates net interest margins between 3.25 and 3.5 percent for the full fiscal year.

Trading profits fell 13 percent and fee income from capital markets also fell about 12 percent, it said.

It added about 5.4 billion rupees to total bad loans in the quarter. Net non performing loans -- or bad loans -- as a proportion of net assets rose to 0.39 percent in the period.

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Most Indian banks, including top three lenders State Bank of India, ICICI Bank and HDFC Bank have seen some softness in loan demand as corporates cut back on investment due to higher borrowing cost.

India's main policy rate, at 8.5 percent, is at its highest since July 2008 after the Reserve Bank of India raised interest rates 13 times since March 2010 to try to rein in inflation.

Lending by Indian banks increased by 17 percent in the year to December 16 compared with a rise of nearly 24 percent in the same period a year earlier, according to RBI data.

The central bank has forecast credit growth of 18 percent for the financial year ending March compared with more than 21 percent a year earlier.

Axis Bank said loans grew over 20 percent, largely driven by credit to retail and small and medium enterprises.

It trades at twice its book value compared with 1.3 times for State Bank of India, Punjab National Bank (PNBK.NS) and Bank of India and 1.6 times for ICICI Bank , according to Thomson Reuters' Starmine.

On Thursday, larger rival HDFC Bank had reported a higher-than-expected 31 percent rise in quarterly net profit on a drop in provisions and higher fee income, even as it cut back on corporate lending to protect margins.

Of the 44 analysts tracking the stock, 37 have a 'buy' or a 'strong buy' rating on it while 6 rate it a 'hold', according to Thomson Reuters' Starmine. One analyst rates the stock a 'sell'.

Shares of Axis Bank fell about a quarter in the year to January 19, compared with a 13.3 percent drop in the banking index.

On Friday, its shares rose by their highest in a single day in more than three months. They closed 5.65 percent higher at 1,009.05 rupees in Mumbai trading.